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USD/JPY has gotten most of the attention overnight reaching a high of 94.36, after comments from a US official supported Japan’s latest anti-deflation policy. Treasury Undersecretary for International Affairs Lael Brainard, who will be the representative at the G20 meeting later this week in Moscow, stated that the US “supports the effort to re-invigorate growth and end deflation in Japan”.

It is expected that Japan will come under attack during the G20 meeting for allowing to JPY to weaken. Japanese Finance Minister Aso said he will tell the G20 that Japan is “firmly conducting monetary and economic policies that will allow Japan to escape a prolonged deflationary stagnation”.

Technically, the break of the 94.05 resistance level has targeted the 95.00 as the next stop for the currency pair. There is resistance ahead of that level at 94.40 and 94.75. Support for USD/JPY is at 93.85 and 93.50.

The EUR/USD was supported yesterday by Bundesbank head Jens Weidmann who made the comment that “the latest indicators do not signal a serious overvaluation of the EUR despite its recent appreciation”. This comment was the reason for EUR jumping from the 1.3380 area to 1.3425 in moments, but the single currency could not sustain that level and slowly drifted back towards the 1.3390-1.3400 area during most of yesterday’s trading afternoon. The overnight range for EUR has shown somewhat of a downward trend.

Resistance for EUR remains at 1.3430, with support at 1.3360. It seems that there is a bit of competing comments now being made regarding the EUR between Germany and France. Last week French President Hollande spoke about setting levels for the EUR and yesterday French Finance Minister issued a statement calling for “a coordinated approach at the international level to enable exchange-rate stability”. The G7 is rumored to be debating issuing a joint statement about not targeting exchange rates in setting policy. This statement would be released before the G20 meeting later this week.

President Obama will deliver his State of the Union this evening. The main problem throughout his presidency has been unemployment. Things haven’t changed much since he gave his first address. The unemployment rate is only slightly better than it was 4 years ago, the economy has sputtered over the last quarter of 2012, and middle income Americans are earning less than they were in 2009.

The President will look for support as he tries to repair the economy and aid the middle class. There are concerns about the US economy. After growing at a 3.1% annual rate in the third quarter, the economy regressed in the last quarter showing a 0.1% decline. The currency markets rarely react to this address unless there are surprises and there are no surprises expected tonight.

Look for the currency markets to remain within their overnight ranges during trading today. The markets will be more interested in what will come from the G20 meeting and any comments pre-meeting by officials could trigger currency moves.

Further reading:  Forex Analysis: EUR/USD Tentatively Stalls Bearish Correction